Funds will be hurt by wage cuts, minister says

A reduction in private sector wages would have damaging consequences for the state of Greece?s social security funds, which have already suffered a substantial fall in revenues as a result of the recession and growing unemployment, Labor Minister Giorgos Koutroumanis said Wednesday.

Presenting Parliament with the state of finances at social security funds, Koutroumanis painted a negative picture of their viability. He said that the recession, which is entering its fifth year, had resulted in the funds losing 6.7 billion euros per year through lower contributions.

He said that there were 471,000 fewer people insured with Greece?s main social security fund, IKA, last year compared to 2008. Koutroumanis said that he expected wages to drop by almost 8 percent this year, leading to further losses for the funds.

The issue of a reduction to the minimum wage and possible cuts to the 13th and 14th monthly salaries that many private sector workers receive is one of the key stumbling blocks in Greece?s negotiations with its lenders over a new bailout. Koutroumanis was adamant that further cuts to salaries would be damaging for the funds.

?A sudden drop in wages, through the scrapping of the 13th and 14th salaries and the minimum wage, would deepen the recession significantly and would lead to a loss of revenues for social security funds,? he told MPs on Parliament?s social affairs committee.

Koutroumanis said that Greece?s ageing population would also put a strain on the pension system. He said that between 50,000 and 60,000 people are joining each year the list of Greeks drawing pensions.